According to a facebook comment I read:

  • The white circle stands for the unity of Lao people
  • Blue signifies the richness of our soil
  • Red is the colour of blood our soldiers shed to protect our home land
I don’t know the validity of those reasons but it compares well against the Australian flag’s colours:
  • It’s red, white and blue because that’s what the British have. We even put their union jack in the top left corner to remind us of the fact.