FDI Policy of Lao PDR

Presented by

Mr. Phouvong Sihomvong Counsellor Economic

& commercial,

Lao Embassy Bangkok in Thailand

Theme of Presentation

• Brief of Lao PDR

• Government Policies on FDI in Lao PDR

• Potential Sectors

• Investment Procedure

Brief of Lao PDR

• Land Area : 236,800 sq. km

• Population : 6 Millions

• Population Density: 25 persons/sq km

• Population Growth: 2,5%

• Labor Force : 3 Millions

• Ethnic : 3 ethnic 49 groups

• Religion: Buddhism

Some Macroeconomic Data

• GDP ( 2001-2005 ): 6.2%

- Agriculture: 3.4%

- Industry: 11.3%

- Service: 6.7%

- GDP ( 2006-2007 ) 8%

- GDP ( 2008-2009 ) 7,5%

- GDP capita ( 2001-2005 ): 491$/pers

- GDP capita ( 2006-2007 ): 678$/pers

- GDP capita (2007-2008 ): 728$/pers

- GDP capita (2008-2009 ): 925$/pers

- Infliation currency: 9,6%

- Exchange rate: 9.653,87 kips/$

Government policies on FDI

Open Door Policy

• New Economic Mechanism:

1986: Shifting from planned economy to a market oriented economy

• Privatization of state enterprises

• Open for FDI

Shares of Private Investment

63.8%

35.7%

14.2%

4.4%

59.9%

22.0%

2001 2005

Foreign

Domestic

Private

Public

Approved and Implemented FDI in Lao PDR

$54.1$133.0

$466.0 $533.0

$1,245.0

$2,670.0

$1,137.0

$393.0

$54.0 $93.0 $155.0$299.0

$449.0

$628.0$771.0

$194.0

64

80

178

161

143

170

191

57

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2001 2002 2003 2004 2005 2006 2007 39508

Mill

ions D

olla

rs

0

50

100

150

200

250

No

. o

f P

roje

ct

Approved

Implemented

No. of Projects

Approved Foreign Investment in Lao PDR

by Sector 2000- March 2008No Sectors Projects Value of Investment (US$)

1 Electricity Generation 41 3,301,791,585

2 Agriculture 175 838,085,036

3 Mining 145 647,818,829

4 Industry & Handicraft 195 467,546,066

5 Services 175 323,125,718

6 Trading 100 275,841,554

7 Construction 29 180,586,874

8 Hotel & Restaurant 61 162,561,245

9 Wood Industry 40 99,810,379

10 Banking 11 55,096,000

11 Telecom 4 72,390,980

12 Garment 37 28,344,920

13 Consultant 32 8,613,252

Grand Total 1.045 6,461,612,438

Approved Foreign Investment in Lao PDR

Top ten Countries 2000- March 20

No Countries Projects Value of Investment (USD)

1 Thailand 179 1,380,523,965

2 China 259 1,285,431,888

3 Vietnam 129 574,741,071

4 France 60 442,501,179

5 Japan 36 423,201,946

6 India 3 350,330,000

7 Australia 28 331,887,528

8 Korea 113 333,315,392

9 Malaysia 33 140,113,392

10 Singapore 2 101,144,000

Government’s Investment Policies

. Promoted Activities eligible for incentives:

1. Production for export;

2. Agro-processing and forestry;

3. Industrial processing;

4. Human resource development and public health;

5. Construction of infrastructure;

6. Production of raw materials and equipment to be supplied to key industrial activities; and

7. Development of the tourism industry and transit services

Forms of Investment foreigns:

1. Business Cooperation by contract

2. Joint Venture

3. 100% foreign owned

Representative Office:

to collect information, study investment opportunities.

Branches:

Foreign Banks, Financial Institutions, Insurance Companies, Consulting firms, and Airlines.

Investment Incentives

ExemptionPeriod

Tax rate during reduction period

tax rate

Zone I 7 years _ 10%

Zone II 5 yearsZone

7.5% for 3 yrs

15%

Zone III 2 years 10% for 2 yrs 20%

Investment Promotion Zoning

Zone i: Mountainous, plateau

zones with no economic

Infrastructure

Zone II: Mountainous, plateau

zones with a moderate level of

economic infrastructure

Zone III: Mountainous, plateau

Zones with good economic

infractructure

Others Intensives

Exemption of import duties and taxes on raw materials and capital equipment;

Exemption of export duty on export products;

10% personal income tax on expatriate employees;

Additional tax holidays, reduced tax rates for large projects with special concession are available upon negotiation

General Custom & Tax Systems

• Regular Import Duty rates between: 3%-40%

• Indirect taxes include :

– Business turnover tax between 5%-10%

– Excise tax between 5%-90%

• Direct taxes include:

– General profit tax at 35%

– Minimum tax at the rate of 0.1% of total revenue

– Personal income tax between 0%-25%

(progressive rate)

– Fees and service charges.

Advantages:

- Comparative Advantages:

• Plentiful Natural Resources

• Large Area of Fertile Agricultural Land

• Varieties of Tourism Development Sites

• Virtually no damaging natural disaster

- Competitive Advantages:

• One of the most Politically Stable Country in the Region

• Socio-Economic and Financial Stability

• High Security (Low Crime Rate)

• Low Labor Costs

• GSP Privileges given from 42 countries

• Liberal Laws and Regulations creating favorable business and investment environments

POTENTIAL SECTORS

Energy

Mining

Agrobusiness

Tourism

Construction Material

Light industry

Services

INVESTMENT SECTORS

ELECTRICITY GENERATION:

• Abundant water resources produced by

tributaries of Mekong river

• Estimated electricity generation potential:

over 18,000 MW

• BOT Investment in hydro-electric facilities

will be substantial

• Investment in ancillary support services

will increase

Existing Generation in Lao PDR

• Plants owned by Electricité du Laos -EdLNam Ngum 1 155 MWNam Leuk 60 MWXeset 1 45 MWNam Mang 3 35 MWSelabam 5 MWNam Ko 1.5 MWNam Dong 1 MW

Renewable Energy (Mini/Pico Hydro Plant) 7 MW

• Solar 170 kW

• Plants owned by private investors

- Houay Ho 150 MW

- Nam Theun-Hinboun 210 MW

MINING SECTOR:

• Mining industry is under developed

• Mining sector presents numerous

potential opportunities for

investment and development

• Mineral deposits : tin, lead, zinc,

iron ore, copper, gold, gypsum,

lignite, sapphires, …

• Concessions granted to foreign

investors

AGRICULTURE-FORESTRY:

• Large stands of tropical hardwoods including teak and rosewood

• Highest ratio of forest area

• Suitable land for various tree Plantation

• Plenty of productive land

Some Agro-Forest Projects in Laos

• Oji Lao Plantation (Japan): 50.000 ha = 49 m (in

USD)

• CITYLAND Resources (Malaysia): 3.500 ha = 11 m

• Daklak Rubber (Vietnam): 10.000 ha = 30 m

• Viet-Lao Joint Stock Rubber(Vietnam):10.000 ha=22 m

• Paksong Highland (Thailand): 26.000 ha = 8 m

• Agarwood Lao Group (Thai/Lao): = 10 m

• Mitr Lao Sugar Co. Ltd. (Thailand) = 22.5 m

• Savannakhet Sugar Corp. (Thailand) = 10 m

• Birla Lao Pulp & Plantations Co. Ltd. (India):50,000 ha=

350 m

TOURISM

1. Culture-Tourism

2. Eco-tourism

3. Agro-Tourism

Tourism Business is now opened to DI

With Foreign Equity of up to 70%

Several natural tourist sites are ng

FDI

From Land-Locked to Land-Linked

Special Economic Zone

North

West

Corrido

r

East

West

Corridor

Emerald

Triangle

Economic

Triangle

Savannakhet-Seno SEZ (S-S SEZ)

• Savannakhet-Seno SEZ (S-S SEZ) established in 2003 by S-S SEZ Decree of the PM

no. 148/PM dated

Sept. 29 2003.

• Site A: 305 ha

• Site B: 20 ha

SITE A 305 ha

SITE B 20 ha

LAO PDR IN THE GLOBAL ECONOMY

Member of international organization ( MIGA,

ASEAN, ASEAN-Japan Centre, WORLD BANK,

ADB, IMF…)

GSP Privileges : 42 countries ( EU, JAPAN,

CANADA, CHINA, … )

NTR with USA (04/02/2005)

Bilateral Investment Treaties with 23 countries

In process of joining WTO

Investment Approval Procedure

Investor

Enterprise

registration

OSS(IPD)

Issue Inv. License

AppraisalOSS

meeting

Provinces

Line ministries

Business

License

Tax registra

tion

One Stop Service

• Unified Investment Application Form for

obtaining: - Investment License,

- Business License,

- Tax Registration Certificate

• Nomination of One Stop Service Unit

comprises of DDFI Staffs and Representatives

from all line ministries to expedite approval

procedure

Investment Promotion Department

Ministry of Planning and Investment

Luang Prabang Road, Vientiane 01001, Lao PDR

Tel: (856-21) 222 690

Fax: (856-21) 215 491

E-mail: investinlaos@gmail.com

Website:http://www.invest.laopdr.org

Thank You For

Your Attention