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 : Population : Population Density: Population Growth: Labor Force : Ethnic : Religion: 236,800 sq. km 6 Millions 25 persons/sq km 2,5% 3 Millions 3 ethnic 49 groups Buddhism

Some Macroeconomic Data

GDP ( 2001-2005 ): - Agriculture: - Industry: - Service: - GDP ( 2006-2007 ) - GDP ( 2008-2009 ) - GDP capita ( 2001-2005 ): - GDP capita ( 2006-2007 ): - GDP capita (2007-2008 ): - GDP capita (2008-2009 ): - Infliation currency: - Exchange rate: 6.2%

3.4% 11.3% 6.7%

8% 7,5% 491$/pers 678$/pers 728$/pers 925$/pers 9,6% 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

22.0%

14.2%

Foreign Domestic Private

59.9% 4.4% 35.7%

63.8%

Public

2001

2005

Approved and Implemented FDI in Lao PDR

$3,000 $2,500 $2,000

Approved Implemented
178 No. of Projects 161 143 $2,670.0 191 170

250

200
No. of Project

Millions Dollars

150
$1,137.0 $771.0 57

$1,500
80

$1,245.0 64 $466.0 $54.1 $54.0 $133.0 $93.0 $155.0 $533.0 $299.0

100

$1,000 $500 $0

$628.0 $449.0

50 $393.0 $194.0 0

2001

2002

2003

2004

2005

2006

2007

39508

Approved Foreign Investment in Lao PDR by Sector 2000- March 2008

No 1 2 Sectors Electricity Generation Agriculture Projects 41 175 Value of Investment (US$) 3,301,791,585 838,085,036

3
4 5 6 7 8 9 10 11

Mining
Industry & Handicraft Services Trading Construction Hotel & Restaurant Wood Industry Banking Telecom

145
195 175 100 29 61 40 11 4

647,818,829
467,546,066 323,125,718 275,841,554 180,586,874 162,561,245 99,810,379 55,096,000 72,390,980

12
13

Garment
Consultant Grand Total

37
32 1.045

28,344,920
8,613,252 6,461,612,438

Approved Foreign Investment in Lao PDR Top ten Countries 2000- March 20
No Countries
1

Projects Value of Investment (USD) 179 1,380,523,965

Thailand

2
3 4

5
6 7 8 9 10

China Vietnam France Japan India Australia Korea Malaysia Singapore

259 129 60 36 3 28 113 33 2

1,285,431,888 574,741,071 442,501,179 423,201,946 350,330,000 331,887,528 333,315,392 140,113,392 101,144,000

Governments Investment Policies

. 1. 2. 3. 4. 5. 6. 7. Promoted Activities eligible for incentives: Production for export; Agro-processing and forestry; Industrial processing; Human resource development and public health; Construction of infrastructure; Production of raw materials and equipment to be supplied to key industrial activities; and 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
Exemption Period Tax rate during reduction period

tax rate

Zone I

7 years

10%

15% 7.5% for 3 Zone yrs Zone III 2 years 10% for 2 yrs 20%

Zone II 5 years

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 Electricit du Laos -EdL Nam Ngum 1 155 MW Nam Leuk 60 MW Xeset 1 45 MW Nam Mang 3 35 MW Selabam 5 MW Nam Ko 1.5 MW Nam Dong 1 MW Renewable Energy (Mini/Pico Hydro Plant) 7 MW Solar 170 kW

Plants owned by private investors - Houay Ho - Nam Theun-Hinboun

150 MW 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 = 8m 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. 2. 3. Culture-Tourism Eco-tourism 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: Site B: 305 ha 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

Tax registra Busin tion

Enterpris e registrati on

Invest or OSS(I PD) Apprai sal

OSS meeting
Issue Inv. License

Province s

Line ministries

ess Licens e

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