This study assesses the technical efficiency of the production of the Lao manufacturing industry based on a firm survey. 974 manufacturing firms in the Economic Census Survey in 2012/13 were used for the analysis with the help of Stochastic Frontiers Analysis (SFA). The study argues that Laos can further develop the manufacturing industry in the future since its share in GDP is currently small. Improving technical efficiency is crucial to develop the manufacturing industry in the future. The firms in the survey achieved only 61.1 percent of their full potential in the efficiency component, indicating that there is significant room for improvement. To this end, this study proposes that short-term policy interventions should prioritise the introduction of an accounting system and credit access to manufacturing firms, and human resource development and increased market access are considered the medium- and long-term policy recommendations.