Read the source material carefully before answering Question 1. Laos is a land-locked country, surrounded by Vietnam, Cambodia, Thailand, Myanmar and China. Access to seaports helps an economy take full advantage of international trade. The economy of Laos has grown rapidly since the government initiated free market reforms, with an average growth rate of approximately $$\(7 \%\)$$ annually in the last 10 years. The free market reforms have encouraged Laos to sell their abundant raw materials internationally and also attracted foreign investment. Laos has large deposits of copper which are in high demand by global manufacturing industries. A new rail link connecting China and Laos is expected to make such transactions easier. The government of Laos has also put a lot of emphasis on education. The adult literacy rate of both males and females has increased from $$\(60 \%\)$$ to $$\(85 \%\)$$ over the last 20 years. The financial sector, including commercial banks, is growing. This has enabled local entrepreneurs to borrow money and encouraged more households to save. However, investors are still uncertain about investing in Laos. There are strict rules and regulations for foreign investors, especially in industries such as mining. The government says the regulations are needed to avoid market failures, such as external costs, and abuse of monopoly power. However, these rules and regulations are sometimes unclear. Laos is one of the lowest in the World Bank's Ease of Doing Business index, which measures how easy it is to start up and run a business in a country. Fig. $$\(1.1\)$$ shows the Ease of Doing Business ranking (1 = easy) and GDP per head of selected countries in 2018. The recent economic slowdown of China may have harmful effects on Laos. China is Laos's largest trading partner and also the largest source of foreign investment into Laos. Answer all parts of Question 1. Refer to the source material in your answers. Identify two roles of commercial banks.

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